Buy Qualcomm While It's Still in the Bargain BinQCOM) for quite some time and it seems like I will never run out of reasons to be bullish on the stock. Apart from the fact that Qualcomm is undervalued and still distressed by last year’s loss in business, the company has also taken several steps in the right direction which I have discussed over numerous articles in the past. In this article, I will be focusing on another opportunity.
Qualcomm Technology Licensing (QTL) and Qualcomm CDMA Technologies (QCT) are the two most significant operating divisions of Qualcomm.
However, both the segments of the company are facing some issues. In the case of QCT segment, competition is rising rapidly, as Samsung used its own manufactured chips in its flagship smartphones Galaxy S6/S6 Edge. Moreover, Apple is also putting efforts to manufacture its own efficient chips. In the case of QTL segment, Qualcomm faces anti-trust issues. The company recently settled a huge lawsuit in China, but faces various others.
Due to this, Qualcomm strategies to enter in various other markets such as drones, IoT, connected cars, and data centers. The company believes that entering into these markets will help the company to grow further, as it has a robust reputation in the industry. Qualcomm is mainly focusing on the connected cars market, as its 3G/4G modems have made their way into several cars.
Furthermore, Qualcomm also provides Snapdragon processors personalized for the automotive market. Most significantly, the company is now offering a connectivity reference platform for auto manufacturers and auto suppliers that features its modems, location chips, Bluetooth, GPS and support for in-vehicle technologies.
Apart from this, ASUSTek is about to launch its new ZenFone 3 powered by Qualcomm’s Snapdragon 820processor. ASUSTek detailed that it decided to use aluminium body for its ZenFone 3 instead of cheap plastic body that was used in its predecessors. ZenFone 3 has 6GB of RAM inside it, and even beats the 4GB of RAM in Galaxy S7 Edge. Qualcomm will largely benefit from ASUSTeK’s decision to sell better quality smartphone.
Zenfone 3 will be available in the market for around $499, as it being powered by massively effective Snapdragon 820 processor. It is highly likely that superior quality ZenFone 3 could get better sales than its predecessors.
If Qualcomm’s prospects weren’t enough, the company is also trading at a discount. With a dividend yield of 4%, Qualcomm is an ideal stock for dividend growth investors. The company’s prospects make the case for investment even stronger, which is why I think the stock is a buy.
Published on Jun 20, 2016By Prudent Investor